Ariba, Wipro, and the Consultant/Channel Game (Part 1)

Earlier in the week, Ariba announced it was partnering with Wipro Consulting Services in a licensing deal. Ariba's goal is to get the outsourcing firm's consulting arm up and running on its sourcing application. Taken alone, the deal is unremarkable; Wipro Consulting is a rather small player on the global procurement-services stage. However, this deal might signal a change in strategy for Ariba, a provider that has struggled, in comparison to its competitors, to build a strong relationship with consulting providers. In light of this, it's useful to note that in its announcement Ariba declares that "Wipro joins a growing number of companies that are teaming with Ariba to deliver spend management solutions to companies around the world."

Clearly, rebuilding channel and consultant relationships is something that matters to Ariba going forward. Moreover, the global angle of this new deal is noteworthy, given that a growing number of companies appear to be considering non-local options for both consulting and outsourcing services. But before exploring that, let's begin this analysis by exploring how channel business models work, and how Ariba and other services providers have treated this area.

Following the announcement, I traded emails with a handful of Ariba's competitors to inquire about the specific number of active consultant/channel partner relationships under their belts. Now, this number is a bit fuzzy for a number of reasons, regardless of the vendor. In most cases, consultants become paid customers of the product. This is especially true when it comes to tools like sourcing and spend analysis that the consulting firm uses to drive its own revenue, versus implementing the solution for a client.

In others cases, consultants use the tool for free, offering it as a "paid" leave-behind to clients, serving as a channel referral partner for the vendor. I've also seen situations where the consulting firm acts as a channel (paid or unpaid), when a client is selecting a particular toolset but has not previously been exposed to the one in question as part of a consulting engagement.

Because consultants actually roll up their sleeves and use these tools (to get better results for clients and to drive their own operating efficiency), all of these approaches are quite different from traditional consultant/vendor channel partner relationships, where the services provider generates revenue from either reselling or implementing a particular toolset. (This is still the case, mind you, in such areas as eProcurement, invoice automation, contract management, etc.)

There is also a third contingent/services procurement scenario, which is different from these examples. In this scenario, managed services providers (MSPs), who manage the administrative as well as some strategic and analytical components of a contingent labor program, commonly partner with software providers in sales situations. They share in the overall percentage of the deal based on spend size (services players always take a significantly higher percentage of spend than the VMS provider).

In the early days of the Spend Management marketplace, it was often the larger vendors with an enterprise software model that succeeded most in leveraging channel relationships. These days, vendor/consultant relationships have a much more traditional SI look to them, as firms ramp up practices based on the implementation and process-consulting revenue they could generate around a product.

When this market was getting off of the ground, vendors like Ariba, Commerce One, SAP, and Oracle were the most successful at developing a consulting-partner ecosystem; however, a series of calculated moves -- not to mention a competitive landscape ready to take advantage of any missteps -- saw Ariba begin to cede its pole position with services channel. A position which, at this point, it appears the venerable Spend Management solutions provider would like to regain.

Jason Busch

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